Former Microsoft CEO Steve Ballmer Admits He Was Wrong About the iPhone

Monday November 7, 2016 3:54 AM PST by Tim Hardwick
In a new Bloomberg interview with Steve Ballmer, the former Microsoft CEO revisited his famously dismissive remarks about the iPhone when it launched back in 2007.

Shortly after Steve Jobs revealed the first iPhone, then-Microsoft CEO Ballmer was asked what he thought of the device during a press conference.

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500 dollars? Fully subsidized? With a plan? I said that is the most expensive phone in the world. And it doesn't appeal to business customers because it doesn't have a keyboard. Which makes it not a very good email machine. ... Right now, we're selling millions and millions and millions of phones a year. Apple is selling zero phones a year. In six months, they'll have the most expensive phone by far ever in the marketplace.
Speaking to interviewer Emily Chang recently, however, Ballmer praised Apple's cellular subsidy model and admitted he wished he had come up with it first.
I wish I had thought of the model of subsidizing phones through the operators. People like to point to this quote where I said the iPhones will never sell. Well the price of $600 or $700 was too high and it was business model innovation by Apple to get it essentially built into the monthly cell phone bill.
Ballmer also admitted it was a mistake for Microsoft not to make handsets and tablets sooner. "I would have moved into the hardware business faster and recognized that what we had in the PC, where there was a separation of chips, systems, and software, wasn't largely going to reproduce itself in the mobile world," he said.

Steve Ballmer is asked about Apple's iPhone in 2007

Ballmer revealed his decision to take Microsoft into the hardware business contributed to the breakdown of his relationship with co-founder Bill Gates. "There was a fundamental disagreement about how important it was to be in the hardware business," Ballmer said. "I had pushed Surface. The board had been a little reluctant in supporting it. And then things came to a climax around what to do about the phone business."

Microsoft entered the hardware market in 2012 with the Surface RT tablet, which sold poorly and saw the company take a $900 million charge to write down the value of inventory. Since then, Microsoft's Surface range has taken off, and generated more than $4 billion in sales for the company for the fiscal year ending June 2016.

Tag: Microsoft
95 comments


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Nicksd84
23 months ago
"You can’t connect the dots looking forward; you can only connect them looking backwards."

- Steve Jobs
Rating: 16 Votes
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Euphemia
23 months ago
Back in 2000, I bought my Nokia 8250 on a phone subsidy in Australia. Phone subsidies have been a common practice for a very long time. I'm not sure why Apple is getting the credit for it.
Rating: 13 Votes
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the8thark
23 months ago
Ballmer was not wrong. That's the thing.
Apple realised the truths in what Ballmer said and worked on them to make the iPhone sell. If everyone had to pay $750 or more outright for their iPhone, no one would. The whole phone plan subsidising where you get to pay off the cost of the phone along with your bill over 24 months is what really allowed the iPhone to take off.
It was comments like Ballmer's that prompted Apple to go for the subsidised approach.

Ballmer's lament about not entering the hardware market sooner is not really a vaid one. MS traditionally is not a hardware company, it's a software company. Apple does the hardware and software vertically integrated whole solution in one approach. An approach MS traditionally has not done.

The interviewer is asking Ballmer - Why is MS not doing what Apple does?
His answer is so captain obvious - Because MS is MS and not Apple.
Rating: 12 Votes
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Smartass
23 months ago
took him long enough to admit it.

Rating: 9 Votes
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infinitejest
23 months ago
Apple managed to build the first great phone. The business model existed before...
Either he still doesn't want to give Apple credit for it or he's really that much of an idiot and is still not getting it.
Rating: 5 Votes
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MrX8503
23 months ago
Ballmer is having trouble admitting the real reason why he was wrong.

The iPhone wasn't successful because of the subsidized model, which existed prior to the iPhone. The iPhone was a success because it was simply a way better phone.

Ballmer not admitting this is the reason he's not the CEO.
Rating: 4 Votes
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Aetles
23 months ago

Ballmer was not wrong. That's the thing.


He sure was wrong about the keyboard, though.
Rating: 4 Votes
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yanksfan114
23 months ago
Correct me if I'm wrong, but wasn't there carrier subsidiaries well before the iPhone? I didn't think that was an Apple innovation.
Rating: 3 Votes
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nviz22
23 months ago
One thing Microsoft knew about is making phones. I mean look today, ten people in the world use a Lumia 950. Their 20 App Store apps offer tremendous selection as well. Almost ten years later, it's not like the iPhone 7/7+ provide major profit margins or make technological progress.
Rating: 3 Votes
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6836838
23 months ago
Nokia and Ericsson were doing subsidised carrier contract phones in the U.K. years before Apple. They didn't invent that model!
Rating: 2 Votes
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